During its latest earnings call, Costco Wholesale Corp. (NASDAQ:COST) offered a rare preview into the inner workings of its pricing and supply chain operations that help the retail giant and its customers stay ahead of the economic turbulence.
What Happened: During its third quarter earnings call on Thursday, Costco’s CEO, Ron Bakris, highlighted the proactive approach of the company’s buyers when reacting to tariff-related pricing volatility, saying that the buying teams adjust prices “daily, and if not hourly,” in response to pricing shifts.
Bakris emphasized the company's speed in passing along savings, noting that their “buyers are immediately the first ones down in those goods,” which allows them to take advantage of every opportunity they can get to lower prices for Costco’s shoppers. “It's about lowering the prices as soon as we can,” he says.
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That strategy is proving critical as the company navigates renewed trade pressures tied to President Donald Trump’s “Liberation Day” tariffs. Rather than reacting defensively, Costco has begun re-routing its supply chains, prioritizing domestic and local sourcing, and accelerating shipments to get ahead of the tariffs.
“In the U.S., we are sourcing more American-made goods where available, including items such as mattresses, pillows and plastic resin goods,” Bakris says.
Costco's agility and quick supply-side changes have already translated into price reductions for members on staples like eggs, butter, and olive oil. This comes amid improvements in the company’s gross margins by 41 basis points year-over-year.
The company’s CFO, Gary Millerchip, says, “Our reported rate in the third quarter was higher year over year by 41 basis points, coming in at 11.25% compared to 10.84% last year and up 29 basis points excluding gas deflation.”
Why It Matters: Analysts, such as Joseph Feldman of Telsey, find the company’s performance “impressive” amid the challenging operating environment, while reiterating an “Outperform” rating with a price target of $1,100 per share, or a 9.04% upside from current levels.
The company reported $63.20 billion in revenue during the third quarter, marginally above consensus estimates at $63.19 billion. It posted a profit of $4.28 per share, ahead of estimates at $4.13.
Price Action: The stock was down 0.43% on Thursday, trading at $1,008.74, and is down 0.37% after hours despite posting a beat on consensus estimates at the top and bottom lines.
According to Benzinga’s Edge Stock Rankings, Costco scores well on Momentum and Quality, but falls short on Value and Growth. It has a favorable price trend in the short, medium, and long term. Click here for deeper insights into the stock and the company.
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